Thursday shares of Weight Watchers (NYSE: WTW) shot up over 18% shortly after the open as investors jumped at the opportunity to own the stock. It was announced that Oprah Winfrey would be in a new ad campaign where she says she lost more than 40 pounds without feeling the normal, depriving effects of dieting. By the close the stock had given back most of the days gains but still added 5.32% on the day.
The timing of this announcement was nothing short of perfect. First of all, this is the time of year where the weight loss industry tries to convince you to make a new year resolution to lose weight, and let's face it, many Americans are overweight. It is no doubt that Weight Watchers is looking to set themselves apart and get a head start on the new year with media mogul Oprah Winfrey on their side.
The other interesting thing is how Oprah gets richer off the new ad campaign. No, they don't pay her to be in the ads. See, she is a huge shareholder as well as a board director. In 2015 the company announced that Oprah had bought $43 million worth of shares (or 6.4 million shares) at a discounted price of $6.79. The day that was announced the stock doubled.
With this kind of ownership you can imagine how successful Thursday was for her. Analysts were quick to point out that on the new campaign news, Oprah made around $3.5 million. Just in one day! So should you jump in an ride the Oprah train to riches? Well not so fast. Weight Watchers is still in a string of missing earnings reports and analysts are not so bullish on the stock. The industry is very competitive and seasonal. Even with the Oprah star power its hard seeing how this name gets back over $16 anytime soon.